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Major sport events and long-term tourism impacts

Solberg HA, Preuss H

Journal of Sport Management

21: 213-234, 2007

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Objectives

What infrastructure do cities need to host major sport events

Potential welfare-economic benefits and costs of the changes in infrastructure

How can infrastructure be used to maximize benefits for future tourism

What should pay the costs of hosting the events

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Stages of long-term period Possibility to promote a city through Olympic bid is

limited Process NOT identical for every event

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Supply side: structural requirements

Major sport events have potential to develop urban structure Housing, labor, recreation, transportation

Must compare long-term development plan with necessary event-related structural requirements Before bidding for or creating events

Whether event-specific development exceeds long-term demand from locals and visitors Peak demand during mega events exceed

capacity in almost every host city

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Supply side: structural requirements

High costs may create negative long-term impacts by reducing other activities that require tax funding

Whole Athletes Villages converted to housing after events

Sport parks, rather than a single sport facility

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Soft-infrastructure change

Skills and knowledge upgrade in service industry English courses

Improve skills and knowledge necessary to win more bid competitions

Improve skills required to secure a safer environment Police, security network

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Destination marketing Production of destination marketing involve

public goods Risk for suboptimal production May be driven by free-rider motives, let others to

fund marketing Government involvement

Promote destination by hosting additional sport or cultural events, fairs, exhibitions, cultural festivals, concerts Combine with improvement in soft-infrastructure,

have potential to increase long-term tourism

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Increased awareness and image

Increased awareness and image of host city or nation may be mixed or no results

Duration of any increased-awareness effects limited 55% did not remember host nations 1 year after Euro

2000 football cup Only 10% remember host nations 5 years after Euro

1996 Tourism products and service, image of destination,

more strongly influenced by city’s broader environment Not only the sport event

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Investment

Not all event-related infrastructure serve tourism

Cities hoping to reach long-term revenues from post-event tourism General structure, not necessary for the event,

but necessary to attract and serve tourists: museums, shopping malls, special tourist attractions

Unpredictable sociopolitical factors 9-11 attacks, SARS, terrorist attacks

Event long-term tourism 13Welfare-economic impacts from inbound tourism

Australia enjoyed stronger growth than its neighboring countries 1994-2000

One of main targets: convention market Small number of tourists, high spending power

Decreased inbound tourism to Australia after Olympics

Revenue per guest night for all commercial accommodations also decreased after Olympics Preparation and increasing supply vs tourism crises and

oversupply

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Event long-term tourism 15Welfare-economic impacts from inbound tourism

Increased tourism demand before Olympics Number of hotel rooms in Sydney ↑40% from 1994 to

2000 Significant decline in number of rooms after

Olympics In part because of conversion of hotel rooms for

residential purposes Demand too low to meet the enhancement in

capacity before Olympics Employment in accommodation industry declined

after Olympics Higher in 1998-99 than 2002-04

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Post-event tourism effect

Time switching effect of tourists to Sydney Postponement or forwarding of a once-in-a-lifetime trip

to Australia What effects would have been without the event Barcelona revenue per available room decreased by

60% in 2 years after Olympics Although number of tourists continue to grow, not

enough to balance the growth in hotel rooms Balanced by positive long-term events: use Olympics to

build up image as cultural city: museums, pedestrian zones

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Post-event tourism effect

Lillehammer: unrealistic optimism caused overinvestments in local hotel sector Several bankruptcies in tourism industry

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Market failure

Market failure occurs if those who would have benefited from welfare-economic gains are unable to coordinate their actions Resulting in lack of funding that prevents the

events from being staged Typically results from presence of public goods Tourism products are bundle of separate

products offered by different suppliers supply side needs to coordinate to maximize aggregate profit

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Market failure

Governments should only become involved in hosting of sport events to prevent market failure

Some hotels may adopt free-rider strategy Let others bear burden of financing the event The product of events become suboptimal

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Role of governments Neither profit-maximizing producers nor event

organizers will undertake activities designed to generate revenue for other producers

Rationale for governmental intervene Funding the event

Motivate those who expect to benefit from events to provide the government with prognosis that exaggerate the positive impacts Local decision makers have high interest in attracting

events Host destination can take advantage of asymmetric

information to provide the government with higher prediction

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Conclusions

Large events can generate revenues that cover operational costs, but not investment in infrastructure

Events can stimulate inbound tourism Too much optimism can initiate investments that exceed

long-term demand Attracting more tourists in post-event period may

require considerable investment Duration of event promotion period is short Upgrades of local infrastructure to provide sufficient

quantity and quality of tourism products and services

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Tourists after events NOT significant

Fourie & Santana-Gallego, 2011

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Participating countries,Events held in off-season (non-summer)

Fourie & Santana-Gallego, 2011

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Tourists increase in all bidders

Fourie & Santana-Gallego, 2011

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Events included in analysis

Fourie & Santana-Gallego, 2011